Tax Scam: IRS Pays Out $3.3 Million To One Lansing Address Last Year

The IRS pays out billions in fraudulent tax refunds, and Lansing is at the top of the list.

The IRS paid out more than $3 million in refunds to one address in Lansing. The IRS has not disclosed that address, but according to a new report issued by the IRS Inspector General, someone filed more than 2100 separate tax returns using that address, and received $3.3 million in fraudulent refunds.

The inspector general says identity thieves filing bogus tax returns got more than $5 billion in refunds last year. The inspector general also says the problem is so rampant., the IRS could pay out as much as $21 billion in fraudulent tax refunds over the next five years.

But even when the government realizes it has been scammed, the inspector general says there's not much that can be done to get the money back.

"The tax thieves or the identity thieves have learned that if they file tax returns early in the tax filing season, before a legitimate taxpayer has the opportunity to do so, they can preempt the legitimate taxpayer's refund," said J. Russell George, the treasury inspector general for tax administration. "Once the money is out the door, it is almost impossible to get it back."

Detroit is named as one of the top five cities for the most fraudulent returns, with the IRS saying fraudulent returns totaled $74 million last year - the fourth highest amount in the country.

The biggest reason for these fraudulent refunds is the IRS is under pressure to process returns and issue refunds quickly, and most employers and financial institutions don't turn in income documents for taxpayers to the IRS until the end of March. That means the IRS is issuing refunds long before it can confirm everything on the taxpayer's return.

An IRS spokesperson says the agency is cracking down on tax fraud, and calls the inspector's general's projection of more than $20 billion in fraudulent payouts in the coming years, significantly overstated. IRS officials argue that projection doesn't take into account the fact it has stepped up its compliance and prevention efforts.

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